ERC hikes Meralco’s electricity rates by 25 centavos per kWh

The hike, under the company's performance based regulation (PBR), will be reflected in its May billing to its customers.

But the ERC said that Meralco's consumers would not feel the increase since it (ERC) also boosted the refund of Meralco’s currency exchange rate adjustment (CERA) by more than 10 centavos per kWh, bringing Meralco’s total CERA refund to 14.61 centavos per kWh.

Since last month, Meralco implemented the four-centavo per kWh CERA over recoveries amounting to P3.92 billion.

Ivanna dela Pena, Meralco’s head of Economics and Utilities said “in effect it would still be reduction for customers with the CERA refund.”

In its ruling released today, ERC finally approved the motion of Meralco to implement its exact rates under the PBR scheme for the year 2009.

The ERC deferred Meralco’s PBR on Oct. 17, 2008 after consumers' group opposed its implementation.

"The ERC revised downwards its approved rates for residential users by as much as P0.34 per kWh after considering the concerns of various sectors, particularly on the impact of the rate adjustment on the greater majority of Meralco's customers and the alleged rate distortions coming from Meralco's distribution costs," ERC said in a statement.

In its ruling, the ERC raised Meralco's maximum allowable price (MAP) to P1.2227 per kWh, or 25 centavos more than its 2008 average of 96. 57 centavos.

The ERC also set at zero the income tax component of Meralco’s rates to prevent the firm from passing it on to its customers.

"The changes made to the decision on Meralco’s PBR rates to address the concerns and issues of intervenors, indeed show that the active participation of consumer groups and other interested parties can go a long way in the decision-making process of the ERC," ERC executive director Francis Saturnino C. Juan said.

The ERC further said that the lifeline users, or those consuming 20 kWh and below, would continue to enjoy the 100 percent discount granted them but should pay only the adjusted P5.30 per month metering charge, while the other lifeline customers should enjoy a discount corresponding to the consumption level under the new lifeline program, including the P21 per customer per month minimum charge.

The ERC adopted the PBR for distribution utilities starting 2005, pursuant to its authority granted under Republic Act 9136, or Electric Power Industry Reform Act (EPIRA), to adopt the internationally accepted rate making system. The PBR hopes to achieve a balance between efficient price levels, allowing utilities efficient revenue to ensure their sustainability, and maintaining or improving network service performance levels.

ERC said it also provided strong incentives to improve operation efficiencies of distribution utilities, citing the case of Australia and United Kingdom where over time, with its built-in mechanisms for incentives and fines depending on the utilities’ performance, PBR led to reductions in the real price of electricity distribution while improving service levels.

Dela Pena said the approved price adjustment would be their first distribution rate increase in six years since the firm's last rate hike was in 2003. Meralco filed the PBR application in 2006.

"We’re happy that we can implement it now,” Dela Pena said.

Meralco president Jose de Jesus said that the increase in electricity rates, as a result of PBR, would compel distribution utilities to improve on its performance. "The increases in power rates are given due to inflation, cost of servicing, and higher cost of investments. But the only difference now, I think, is this rate adjustment is also based on the distribution utility’s ability to perform. That’s there are rewards and penalties for performance and non-performance, respectively," De Jesus said. "From the customers’ point of view, we are going to get increases anyway since this is a fact of life, but we just have to make sure that those increases are based on valid grounds. And this one is based on performance. We need to continue the service otherwise the service will deteriorate," he said.((PNA)